Vietnam 'will continue economic reforms'

Labourers working at a garment factory outside Hanoi on Aug 19, 2014.
Labourers working at a garment factory outside Hanoi on Aug 19, 2014. PHOTO: REUTERS

Policymakers aim to boost growth to fastest pace in nine years, but obstacles lie ahead

HANOI • Vietnam wants to reassure investors that new leaders chosen last week by Communist officials at its party congress will press ahead with economic reforms as policymakers aim to boost growth to the fastest pace in nine years.

Policymakers will continue "refining and modernising the financial and banking sector", further privatise state-owned companies and upgrade its infrastructure, said Deputy Foreign Minister Le Hoai Trung, who was re-elected last week to the powerful central committee of 200 top officials.

"The message is that we will continue with our economic reforms even though we know there are challenges," Mr Trung said last Thursday at the close of the party meeting that takes place every five years to chart the country's direction. "The reforms have brought about historic and significant results, so we would go forward with it. It's also the wish of the public."

Vietnam's Communist party officials gathered last week to choose a new slate of leaders who will lead the country until 2020 and set a growth path that avoids a repeat of past mistakes, including soaring credit growth that saddled banks with bad debt and preferential treatment of state companies that created inefficiencies.

General Secretary Nguyen Phu Trong was re-elected to the position for a second term while Deputy Prime Minister Nguyen Xuan Phuc was nominated to replace premier Nguyen Tan Dung when his term ends in July, raising questions whether the political transition will slow the pace of reforms.

"Vietnam operates under a consensus-based decision-making framework, and therefore changes in personnel will not immediately alter the policy trajectory," wrote Mr Andrew Fennell, Hong Kongbased associate director of Asia-Pacific sovereign ratings at Fitch Ratings, in a research note.


They want stability for regime security... That does not create an open environment for more reforms or faster reforms.

MR TUONG VU, an associate professor of political science at the University of Oregon, on the likelihood that the new leadership will be resistant to bold initiatives

Vietnam's commitment to a structural reform-oriented policy, including a focus on macro stability and market liberalisation, will remain important factors for the country's macro outlook, according to Mr Fennell.

Still, the new leadership will probably shun bold initiatives and may slow reforms needed to meet the conditions of the Trans-Pacific Partnership trade pact, such as allowing for independent labour unions, said Mr Tuong Vu, an associate professor of political science at the University of Oregon.

"They want stability for regime security," said Mr Vu. "That does not create an open environment for more reforms or faster reforms."

Vietnam is forecast to expand at 6.7 per cent this year and to be among the world's fastest-growing economies. But a cloud over its economic picture is a trade deficit, widening public debt and Hanoi's failure to meet its goal to privatise 289 state companies last year.

"Equitisation of state-owned companies is a very difficult process in any country," said Mr Trung, adding that Vietnam has increased the number of state companies that were privatised. Policy makers "would go forward" with it, he said.

During the congress, several leaders expressed concerns that Vietnam risked falling behind regional peers. Average growth in 2011 through 2015 was 5.9 per cent, lower than the 6.5 per cent-to-7 per cent target that the government had set.

"We are now trying to change to a new development model that aims for sustainability," Mr Trung said. "We would continue with our policies of trying to mobilise international resources including foreign direct investment."


Four to watch

Vietnam's leadership for the next five years is taking shape after a recent Communist Party congress. The picks for prime minister, president and National Assembly chairman are expected to be rubber-stamped by the Parliament around mid-year and will serve through 2020. Here are four faces to watch.



Nguyen Phu Trong.

He heads a conservative wing of the party. Analysts say Mr Trong looks committed to continue opening up the economy, but potentially at a slower pace than the administration of Prime Minister Nguyen Tan Dung, who retires this year. How Mr Trong balances ties with the United States and China, given its territorial frictions with the latter, its biggest trading partner, is another big question.



Nguyen Xuan Phuc.

Vice-premier Nguyen Xuan Phuc is not known for grand initiatives, having overseen a three-year campaign to streamline the bureaucracy. Some analysts have described him as a straight- shooter with solid connections. Mr Phuc, a former vice- party chief of the central province of Quang Nam, where he was born, studied economics in Singapore.

He is heading up a committee looking at Vietnam's rules against corruption. On foreign policy, he has said "justice" will win in Vietnam's disputes with China in the South China Sea.



Tran Dai Quang.

Currently minister of public security, Mr Quang visited the US last year and was quoted as saying Vietnam welcomed US cooperation in the region. His talks there focused on maritime security, cyber issues and human trafficking. He's tipped by some analysts as a potential future party chief. He has a Vietnamese doctorate degree in law.



Nguyen Thi Kim Ngan.

Now the vice-chairman of the National Assembly, Nguyen Thi Kim Ngan, who was born in the Mekong Delta province of Ben Tre, is something of a dark horse. She has a master's degree in economics and is the former minister of labour, invalids and social affairs. Ms Ngan also served as deputy trade minister.


A version of this article appeared in the print edition of The Straits Times on February 02, 2016, with the headline 'Vietnam 'will continue economic reforms''. Print Edition | Subscribe